Prize or No, Arafat Still Has Much to Prove

By JOEL GREENBERG

Published: October 16, 1994

Correction Appended

EVEN as he was awarded the Nobel Peace Prize last week for his accord with Israel, Yasir Arafat faced his most critical test as leader of the Palestinians: Can he deliver to his own people, and to Israel, the sense of security on which peace is based?

In the three months since he returned to Gaza to set up a provisional government, the leader of the Palestine Liberation Organization has presided over the beginnings of a physical rebuilding, but has yet to establish real optimism. People remain cynical -- in particular about whether Mr. Arafat, as the governor of a territory, can shed the autocratic habits he acquired as a guerrilla leader. And while Gaza and the West Bank town of Jericho have been relatively tranquil, he has yet to disarm the militants who threaten the peace talks and the self-rule arrangement itself. A High-Wire Act

So the kidnapping and killing last week of an Israeli soldier, Cpl. Nahshon Waxman, by the militant Islamic group Hamas, threw into sharp relief the question of whether Mr. Arafat is moving effectively to establish his authority as the governing leader of the Palestinians.

Even though it turned out that the soldier was not held on soil under Mr. Arafat's control -- he was killed by his captors Friday as Israeli commandos raided their hideout north of Jerusalem -- the kidnapping shook Mr. Arafat's unsteady authority in the self-rule zones. During the five days the soldier was held, the kidnapping forced him to walk a tightrope between demands from Israel that he crack down on the militants, and warnings from his radical Muslim rivals that he not become a tool of the Israelis. As he executed this balancing act last week, ordering the arrest of 160 militants in the process, he exposed a basic vulnerability in the Israeli-Palestinian accord.

For months Mr. Arafat had resisted Israeli demands that he confront and disarm Hamas in his territory; he insisted that the movement could be pacified by drawing it into Palestinian politics. Now the question of his long-run willingness to make war on the organization is more critical than ever, with both Hamas -- which Saturday rallied thousands of supporters to protest the arrests, and threatened to "make Gaza burn," -- and Israel clearly stating their terms.

As Mr. Arafat's policemen rounded up Hamas figures in response to Israeli pressure to find the kidnappers last week, a senior Hamas figure, Mahmud Zahar, warned: "I am telling Yasir Arafat, do not repeat the experience of the occupation. If you want to continue this path, you will have to suffer the consequences."

A few hours later, in announcing that the effort to rescue the soldier had failed, a grim Israeli Prime Minister, Yitzhak Rabin, declared: "Whoever wants to advance peace must fight the radical, murderous terrorists of Hamas and Islamic Jihad and the rejectionists because they are the murderers of peace."

The pressure to make a choice between working with Hamas and making peace with Israel came amid the first, tentative signs of recovery in Gaza under the administration of Mr. Arafat's Palestinian Authority.

After years of neglect, streets there do look cleaner. Walls long defaced by nationalist graffiti are freshly whitewashed, and some fetid piles of garbage in vacant lots have disappeared. Groups of men, employed in a $5 million dollar clean-up campaign funded by Japan through the United Nations, push brooms at street corners and paint walls.

But Gaza, the center of Palestinian self-rule, is still a long way from law and order. Hamas gunmen occasionally ride through neighborhoods, rifles poking out of their cars, in defiance of Palestinian policemen. Police officers try to direct downtown traffic, but their presence is otherwise hardly felt. Since setting up his provisional government there last July, Mr. Arafat has yet to transform the abidingly cynical community, ground down by years of occupation, into a civic-minded society.

Accustomed to leading a guerrilla movement, he prefers to work through personal influence and patronage. He is reluctant to delegate responsibility, and takes a dim view of demands for greater accountability from both Palestinians and foreign governments, which are withholding financial aid until they know how it will be spent.

Over lunch several weeks ago in his office on Gaza's seashore, Mr. Arafat shrugged off suggestions that he has had to make a profound adjustment from being a globe-trotting symbol of the Palestinian movement to manager of Gaza and Jericho. "For me it's the same, being outside and inside," he insisted, as timid aides listened intently. "The P.L.O. has been working for a long time as a government. From the P.L.O. budgets we were spending between 25 to 30 million dollars per month for schools, for universities, hospitals, education, health services. I was doing the same from the beginning."

Beyond the questions raised by his style of rule, Mr. Arafat is caught in a vise created by the peculiar circumstances of Palestinian self-government in Gaza.

Despite the withdrawal of Israeli troops from most of the Gaza Strip, its population is still heavily dependent on Israel. Tens of thousands of Gazan workers still need entry permits from Israel, which controls the area's borders, even with Egypt. Severely ill Palestinians still seek referrals to Israeli hospitals because they are better equipped than those in Gaza.

In other words, the realities of daily life have not changed much. Skeptical Gazans say they still face the same hardships, with the Israeli occupiers simply replaced by Palestinians in uniform. To them, Mr. Arafat seems less the leader of an an embryonic state than the steward of an Israeli protectorate, a supplicant who in talks with Israel asks only for more carefully measured doses of freedom.

Mr. Arafat is also hamstrung by internal constraints.

Attacks by Hamas, such as the kidnapping and a shooting spree in Jerusalem last Sunday that killed two people and wounded 13, eat away at the authority of his provisional government, which is bound by the agreement with Israel to stop such violence. A Choice

Trying to cobble together a consensus that would strengthen his rule, Mr. Arafat has met with Hamas leaders in an effort to draw them into his administration. But what Israel wants is for him to stifle the militants to show that Palestinian self-rule does not threaten Israeli security.

Mr. Arafat's response has been the traditional recourse of the weak: Move cautiously. To appease Israel, he ordered the arrests of Muslim militants, including last week's sweep. But in the past he has set most of the prisoners free, to avoid an irreparable break with the Islamic radicals.

One way Mr. Arafat might strengthen his position is to hold elections, allowing him to reassert his leadership and emboldening him to move decisively against the militants. Israel and the P.L.O. have begun to negotiate about elections, but persistent attacks by Hamas threaten to derail the talks, as they did last week.

According to the Israeli-P.L.O accord signed last year, the elections must be preceded by an Israeli pullback in the West Bank. But the Israelis say they are hesitant to withdraw until Mr. Arafat shows he can control the militants. "It's a Catch-22 situation," said Khalil Shikaki, a critic of Mr. Arafat who is director of the Center for Palestine Research and Studies in Nablus. "Arafat needs elections so he can deliver security. But the Israelis say there can't be elections until he delivers security first."

Photos: Yasir Arafat flanked by his aides during a ceremony in August. (Rina Castelnuovo for The New York Times) (pg. 1); Yasir Arafat and a Palestinian boy at the Nuseirat refugee camp in the Gaza Strip. (Rina Castelnuovo for The New York Times) (pg. 4)

Correction: October 23, 1994, Sunday A picture caption last Sunday about Yasir Arafat misidentified one of two men appearing at a ceremony with him and misstated the date. The man at Mr. Arafat's left was Harry Birnholz, deputy director for the United States Agency for International Development, not an aide to Mr. Arafat. The event was in July, not August.